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World’s Key Workers Threaten to Hit Economy Where It Will Hurt – BNN

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The pandemic has put unprecedented strain on global supply chains -– and also on the workers who’ve kept those systems running under tough conditions. It looks like many of them have had enough.

A surge in strikes and other labor protests is threatening industries all over the world, and especially the ones that involve moving goods, people and energy around. From railway and port workers in the US to natural-gas fields in Australia and truck drivers in Peru, employees are demanding a better deal as inflation eats into their wages.

Precisely because their work is so crucial to the world economy right now –- with supply chains still fragile and job markets tight –- those workers have leverage at the bargaining table. Any disruptions caused by labor disputes could add to the shortages and soaring prices that threaten to trigger recessions.

That is emboldening employees in transportation and logistics -– which spans everything from warehouses to trucking — to stand up to their bosses, according to Katy Fox-Hodess, a lecturer in employment relations at Sheffield University Management School in the UK. She points to already-tough working conditions in the industry after years of deregulation. 

Workers Bear Brunt

 “Global supply chains weren’t calibrated to deal with a crisis like the pandemic, and employers have really pushed that crisis onto the backs of workers,” Fox-Hodess says.

For their part, central bankers have been fretting about workers getting paid too much and setting off a wage-price spiral like the one that sent inflation soaring in the 1970s. In fact there’s not much sign of that, with wage gains generally lagging behind prices, partly because organized labor is broadly less powerful than it was back then.

But that may mask a different problem. Much of today’s inflation stems from specific chokepoints -– and labor unrest in those key industries could have wider ripple effects on prices. A threatened strike by Norway’s energy workers, for example, sent fresh tremors through European natural-gas markets earlier this month.

There’s also a risk to the rebalancing of economies. In the pandemic, people bought more goods at the expense of services like plane tickets or hotel rooms, putting pressure on supply chains and stoking inflation. The expectation is that spending habits will revert to normal, with consumers eager to take a trip again. But strikes by cabin staff at Ryanair Holdings Plc, or airport workers in Paris and London, are adding to the travel turmoil that may put would-be tourists off.

Here’s a roundup of some of the hot spots of labor unrest rattling the global economy.

Trains and Trucks…

In the US, where a long-declining labor movement is showing signs of awakening as unions establish footholds at companies like Starbucks Corp. and Amazon.com Inc., some of the biggest disputes are in the transportation industry. Looming over the country’s already battered supply chains is the threat of a rail strike that could paralyze the movement of goods.

After two years of unsuccessful negotiations with the nation’s largest railways, President Joe Biden this month established a panel to resolve a deep rift between 115,000 workers and their employers. The Presidential Emergency Board has until mid-August to come up with a contract plan that’s acceptable to both sides.

“There’s a very tight labor market, so that puts workers in a position where they have both an accumulation of lots of grievances and they feel empowered,” Cornell University associate professor Eli Friedman said. The school tracked 260 strikes and five lockouts in the US involving about 140,000 employees in 2021, leading to about 3.27 million strike days.

In the UK, train drivers say they will strike on July 30, and two other transportation unions are also planning 24-hour walkouts next week. It’s not just passengers who will suffer: A.P. Moller-Maersk A/S, the world’s No. 2 container shipping line, warned that those actions would cause “significant disruption” to the movement of freight.

Canada has seen strikes on its railways, too — part of the country’s biggest wave of labor strife for decades. Tens of thousands of construction workers also walked off the job earlier this summer. In May, there were 1.1 million worker-days lost to stoppages, the highest monthly total since November 1997.

In many countries, truck drivers protesting against the high cost of fuel have been at the forefront of labor unrest. Truckers in Peru are holding a nationwide strike this month. In Argentina, roadblocks by drivers in June lasted a week, delaying about 350,000 tons of crops -– roughly 10 small ship cargoes. In South Africa, drivers blocked roads including a key trade link to neighboring Mozambique, in a demonstration against record pump prices.

…And Ports and Ships

The labor dispute that US economy watchers worry about most is the one involving more than 22,000 dockworkers on the West Coast. Their contract expired at the start of July, and the International Longshore and Warehouse Union is negotiating a new one. Both sides say they want to avoid stoppages that could shut down ports handling almost half of America’s imports.

Meanwhile the Port of Oakland, California’s third-busiest, had to close some of its gates and terminals this past week -– adding to the wait time for imported goods — because truckers blocked access in protest against a gig-work law that could take 70,000 drivers off the road.

German ports are scrambling after a two-day strike earlier this month worsened cargo bottlenecks that are snarling shipping and hurting Europe’s largest economy.

In South Korea, the shipbuilding industry has seen a surge in orders amid the supply-chain crunch. Workers have been protesting for several weeks at a dock for Daewoo Shipbuilding & Marine Engineering Co. in the southern city of Geoje, demanding a 30% pay hike and an easing of their workload. The action has already delayed the production and launch of three ships, and President Yoon Suk Yeol urged ministers to resolve it. A resolution looked to be close as of this weekend.

Air-Travel Chaos

Labor disputes have contributed to Europe’s summer of travel chaos, with air and rail companies already short-staffed after the pandemic squeeze on labor markets. Carriers including Ryanair, EasyJet Plc and Scandinavia’s SAS have seen their schedules disrupted by strikes. 

A walkout at Charles de Gaulle Airport outside Paris forced the cancellation of flights, and London’s Heathrow looked at risk of a similar fate before the Unite Union called off a proposed walkout on Thursday, saying it had received a “sustainably improved offer” of pay raises.

Even in normally relaxed Jamaica, flight controllers staged a one-day strike on May 12 to complain about low pay and long hours, closing Jamaican airspace and disrupting travel for more than 10,000 people in the Caribbean island. At least one plane was forced to return to Canada mid-trip.

Energy Crunch

A strike by oil workers in Norway threatened another blow to Europe’s energy supplies, which have already been hit by the war in Ukraine with reduced gas flows from Russia. The dispute was resolved when the government stepped in to propose a compulsory wage board. The country’s labor minister said she had no choice but to intervene, because of the potential for “far-reaching societal impacts for all of Europe.” A further escalation of the strike could have shut down more than half of Norway’s gas exports.

In Australia, one of the world’s top exporters of liquefied natural gas, workers on Shell Plc’s Prelude floating LNG production facility in Western Australia have extended industrial action until Aug. 4, according to the Offshore Alliance union. The stoppage has halted loading at an export facility, exacerbating global shortages of the fuel.

Labor groups at South African state-owned utility Eskom Holdings SOC Ltd. won a pay increase that roughly keeps pace with inflation after a weeklong walkout that worsened the country’s power outages — and was illegal under laws that bar Eskom workers from striking because the provision of electricity is considered an essential service

©2022 Bloomberg L.P.

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Economy

Here is Trump economy: Slower growth, higher prices and a bigger national debt

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If Donald Trump is re-elected president of the United States in November, Americans can expect higher inflation, slower economic growth and a larger national debt, according to economists.

Trump’s economic agenda for a second term in office includes raising tariffs on imports, cutting taxes and deporting millions of undocumented migrants.

“Inflation will be the main impact” of a second Trump presidency, Bernard Yaros, lead US economist at Oxford Economics, told Al Jazeera.

“That’s ultimately the biggest risk. If Trump is president, tariffs are going up for sure. The question is how high do they go and how widespread are they,” Yaros said.

Trump has proposed imposing a 10 percent across-the-board tariff on all imported goods and levies of 60 percent or higher on Chinese imports.

During Trump’s first term in office from 2017 to 2021, his administration introduced tariff increases that at their peak affected about 10 percent of imports, mostly goods from China, Moody’s Analytics said in a report released in June.

Those levies nonetheless inflicted “measurable economic damage”, particularly to the agriculture, manufacturing and transportation sectors, according to the report.

“A tariff increase covering nearly all goods imports, as Trump recently proposed, goes far beyond any previous action,” Moody’s Analytics said in its report.

Businesses typically pass higher tariffs on to their customers, raising prices for consumers. They could also affect businesses’ decisions about how and where to invest.

“There are three main tenets of Trump’s campaign, and they all point in the same inflationary direction,” Matt Colyar, assistant director at Moody’s Analytics, told Al Jazeera.

“We didn’t even think of including retaliatory tariffs in our modelling because who knows how widespread and what form the tit-for-tat model could involve,” Colyar added.

‘Recession becomes a serious threat’

When the US opened its borders after the COVID-19 pandemic, the inflow of immigrants helped to ease labour shortages in a range of industries such as construction, manufacturing, leisure and hospitality.

The recovery of the labour market in turn helped to bring down inflation from its mid-2022 peak of 9.1 percent.

Trump has not only proposed the mass deportation of 15 million to 20 million undocumented migrants but also restricting the inflow of visa-holding migrant workers too.

That, along with a wave of retiring Baby Boomers – an estimated 10,000 of whom are exiting the workforce every day – would put pressure on wages as it did during the pandemic, a trend that only recently started to ease.

“We can assume he will throw enough sand into the gears of the immigration process so you have meaningfully less immigration, which is inflationary,” Yaros said.

Since labour costs and inflation are two important measures that the US Federal Reserve weighs when setting its benchmark interest rate, the central bank could announce further rate hikes, or at least wait longer to cut rates.

That would make recession a “serious threat once again”, according to Moody’s.

Adding to those inflationary concerns are Trump’s proposals to extend his 2017 tax cuts and further lower the corporate tax rate from 21 percent to 20 percent.

While Trump’s proposed tariff hikes would offset some lost revenue, they would not make up the shortfall entirely.

According to Moody’s, the US government would generate $1.7 trillion in revenue from Trump’s tariffs while his tax cuts would cost $3.4 trillion.

Yaros said government spending is also likely to rise as Republicans seek bigger defence budgets and Democrats push for greater social expenditures, further stoking inflation.

If President Joe Biden is re-elected, economists expect no philosophical change in his approach to import taxes. They think he will continue to use targeted tariff increases, much like the recently announced 100 percent tariffs on Chinese electric vehicles and solar panels, to help US companies compete with government-supported Chinese firms.

With Trump’s tax cuts set to expire in 2025, a second Biden term would see some of those cuts extended, but not all, Colyar said. Primarily, the tax cuts to higher earners like those making more than $400,000 a year would expire.

Although Biden has said he would hike corporate taxes from 21 percent to 28 percent, given the divided Congress, it is unlikely he would be able to push that through.

The contrasting economic visions of the two presidential candidates have created unwelcome uncertainty for businesses, Colyar said.

“Firms and investors are having a hard time staying on top of [their plans] given the two different ways the US elections could go,” Colyar said.

“In my entire tenure, geopolitical risk has never been such an important consideration as it is today,” he added.

 

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Economy

China Stainless Steel Mogul Fights to Avoid a Second Collapse

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Chinese metal tycoon Dai Guofang’s first steel empire was brought down by a government campaign to rein in market exuberance, tax evasion accusations and a spell behind bars. Two decades on, he’s once again fighting for survival.

A one-time scrap-metal collector, he built and rebuilt a fortune as China boomed. Now with the economy cooling, Dai faces a debt crisis that threatens the future of one of the world’s top stainless steel producers, Jiangsu Delong Nickel Industry Co., along with plants held by his wife and son. Its demise would send ripples through the country’s vast manufacturing sector and the embattled global nickel market.

 

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Why Trump’s re-election could hit Europe’s economy by at least €150 billion

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A Trump victory could trigger a 1% GDP hit to the eurozone economy, with Germany, Italy, and Finland most affected. Renewed NATO demands and potential cessation of US aid to Ukraine could further strain Europe.

The potential re-election of Donald Trump as US President poses a significant threat to the eurozone economy, with economists warning of a possible €150 billion hit, equivalent to about 1% of the region’s gross domestic product. This impact stems from anticipated negative trade repercussions and increased defence expenditures.

The recent attack in Butler, Pennsylvania, where former President Trump sustained an ear injury, has boosted his re-election odds. Prediction markets now place Trump’s chances of winning at 71%, a significant rise from earlier figures, while his opponent, Joe Biden, has experienced a sharp decline, with his chances dropping to 18% from a peak of 45% just two months ago.

Rising trade uncertainty and economic impact from tariffs

Economists James Moberly and Sven Jari Stehn from Goldman Sachs have raised alarms over the looming uncertainty in global trade policies, drawing parallels to the volatility experienced in 2018 and 2019. They argue that Trump’s aggressive trade stance could reignite these uncertainties.

“Trump has pledged to impose an across-the-board 10% tariff on all US imports including from Europe,” Goldman Sachs outlined in a recent note.

The economists predict that the surge in trade policy uncertainty, which previously reduced Euro area industrial production by 2% in 2018-19, could now result in a 1% decline in Euro area gross domestic product.

Germany to bear the brunt, followed by Italy

Germany, Europe’s industrial powerhouse, is expected to bear the brunt of this impact.

“We estimate that the negative effects of trade policy uncertainty are larger in Germany than elsewhere in the Euro area, reflecting its greater openness and reliance on industrial activity,” Goldman Sachs explained.

The report highlighted that Germany’s industrial sector is more vulnerable to trade disruptions compared to other major Eurozone economies such as France.

After Germany, Italy and Finland are projected to be the second and third most affected countries respectively, due to the relatively higher weight of manufacturing activity in their economies.

According to a Eurostat study published in February 2024, Germany (€157.7 billion), Italy (€67.3 billion), and Ireland (€51.6 billion) were the three largest European Union exporters to the United States in 2023.

Germany also maintained the largest trade surplus (€85.8 billion), followed by Italy (€42.1 billion).

Defence, security pressures and financial condition shifts

A Trump victory would also be likely to bring renewed defence and security pressures to Europe. Trump has consistently pushed for NATO members to meet their 2% GDP defence spending commitments. Currently, EU members spend about 1.75% of GDP on defence, necessitating an increase of 0.25% to meet the target.

Moreover, Trump has indicated that he might cease US military aid to Ukraine, compelling European nations to step in. The US currently allocates approximately €40bn annually (or 0.25% of EU GDP) for Ukrainian support. Consequently, meeting NATO’s 2% GDP defence spending requirement and offsetting the potential reduction in US military aid could cost the EU an additional 0.5% of GDP per year.

Additional economic shocks from Trump’s potential re-election include heightened US foreign demand due to tax cuts and the risk of tighter financial conditions driven by a stronger dollar.

However, Goldman Sachs believes that the benefits from a looser US fiscal policy would be marginal for the European economy, with by a mere 0.1% boost in economic activity.

“A Trump victory in the November election would likely come with significant financial market shifts,” Goldman Sachs wrote.

Reflecting on the aftermath of the 2016 election, long-term yields surged, equity prices soared, and the dollar appreciated significantly. Despite these movements, the Euro area Financial Conditions Index (FCI) only experienced a slight tightening, as a weaker euro counterbalanced higher interest rates and wider sovereign spreads.

In conclusion, Trump’s potential re-election could have far-reaching economic implications for Europe, exacerbating trade uncertainties and imposing new financial and defence burdens on the continent.

 

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